Earlier this month, Barack Obama apparently completed an anti-free-market trifecta, adding "protectionist" to a rap sheet that already included "deficit spender" and "serial nationalizer." And not just any protectionist, mind you. In the words of former Bush spokesman Tony Fratto, Obama will hereafter be known as "the president who ‘lost' trade for America." The following day, the Wall Street Journal editorial page elaborated: "America now has its first protectionist President since Herbert Hoover."
So what did Obama do to earn this unsavory distinction? Order the Coast Guard to dump a fleet of German cars into the Atlantic? Set fire to a shipment of Malaysian T-shirts? Er, not exactly. What sent the self-styled defenders of capitalism into fits of hysterics was a modest tariff on Chinese tires--a single product accounting for a tiny fraction of both U.S. imports and Chinese exports. If this is what passes for a "whopper" of "geopolitical" proportions, as The Economist's editorialized, then one struggles to describe bona fide protectionism--like, say, the Smoot-Hawley tariff.
In fact, not only is the tire tariff economically trivial. But, unlike the typical restriction, our existing trade agreements specifically permit it. The law dates back to 2000, when the deal paving the way for China to join the World Trade Organization faced significant opposition in the United States. To defuse that opposition, Congress insisted on a provision allowing the White House to impose restraints on a Chinese product if the U.S. International Trade Commission deemed it a "disruption" to the U.S. market. (Basically, too many imports, too quickly.) The Chinese might not enjoy the benefits of WTO membership today--among other things, stable trade relations with the world's richest countries--if they hadn't made this concession.
Fast forward nine years and it is hard not to see the administration's actions in a similar light. With anti-trade sentiment rising in the aftermath of the worst financial crisis since the 1930s, it's become increasingly difficult to resist genuine protectionism--to say nothing of passing new trade pacts. (Bilateral deals with Colombia, South Korea, and Panama have all stalled out in Congress.) Absent a small gesture on behalf of American workers, it's safe to say the trade agenda would be doomed for the foreseeable future. (It may be anyway, of course.) Which is why Obama's decision seemed relatively straightforward once the International Trade Commission ruled that Chinese tires were in fact disruptive. Even so, Obama announced that the tariff would top out at 35 percent, well below the 55 percent recommended by the ITC.
So the tariff is modest, narrow, legal, and designed to preserve the political viability of free trade. The Chinese, of all people, understand this. Beijing initially reacted with barely a murmur, putting out a mild, pro forma statement of protest. Though a domestic backlash eventually forced the regime to take a tougher line, China has pledged to let the WTO adjudicate the dispute--meaning that, among other things, there shouldn't be any broader economic fallout.
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COMMENTS (8)
Oh, sorry, you know me: I thought you were asking if he is still protecting Wall Street. You know, like he is about to protect the interests of the health care industry----despite the industry itself. And of course the Republicans.
And surely we can count on Obama to protect the Chinese government from citizens there who long for their own Thomas Jefferson. Doesn't TNR want demcocracy to flourish there. You know, someday?
But I suspect TNR doesn't give a crap about that, does it? This rhetorical democracy bullshit is only for Iran, Venezuela and North Korea.
Ah, if only you could be Esteemd Intellectuals in Washington without all that hypocrisy dripping from every page.
Maybe God makes intelle ... view full comment
Oh, sorry, you know me: I thought you were asking if he is still protecting Wall Street. You know, like he is about to protect the interests of the health care industry----despite the industry itself. And of course the Republicans.
And surely we can count on Obama to protect the Chinese government from citizens there who long for their own Thomas Jefferson. Doesn't TNR want demcocracy to flourish there. You know, someday?
But I suspect TNR doesn't give a crap about that, does it? This rhetorical democracy bullshit is only for Iran, Venezuela and North Korea.
Ah, if only you could be Esteemd Intellectuals in Washington without all that hypocrisy dripping from every page.
Maybe God makes intellectual honesty, courage and integrity easier to come by up in Heaven.
george
The Economist article has much more analytical timber in it and makes a much stronger case than Mr. Scheiber gives it credit for.
http://www.economist.com/displayStory.cfm?story_id=14450332&source=most_...
The Economist article has much more analytical timber in it and makes a much stronger case than Mr. Scheiber gives it credit for.
http://www.economist.com/displayStory.cfm?story_id=14450332&source=most_...
It's worth noting that the Economist's bias doesn't appear to be based on party lines but a sort of retrospective embarassment over its alarmism about Bush's steel tariffs. Here's their article from the time, where they condemn the steel tariffs much more strongly than Obama's tire tariffs, calling them "damaging," "stupid," and "well outside the ordinary run of bad economic policy".
http://www.economist.com/opinion/displaystory.cfm?story_id=1021395
It's worth noting that the Economist's bias doesn't appear to be based on party lines but a sort of retrospective embarassment over its alarmism about Bush's steel tariffs. Here's their article from the time, where they condemn the steel tariffs much more strongly than Obama's tire tariffs, calling them "damaging," "stupid," and "well outside the ordinary run of bad economic policy".
http://www.economist.com/opinion/displaystory.cfm?story_id=1021395
I hope so, I hope he's a 'protectionist.'
Me? I've reversed my position on low-tariff policies, we should raise tariffs, lots of tariffs, particularly on industrial products.
The other way? Didn't work. Freaked everyone out.
I hope so, I hope he's a 'protectionist.'
Me? I've reversed my position on low-tariff policies, we should raise tariffs, lots of tariffs, particularly on industrial products.
The other way? Didn't work. Freaked everyone out.
I imagine our Canadian friends, especially their soft lumber industry, would be surprised to learn that the Bush admin. had any "free trade" credentials.
Especially after the tariffs remained in place after the US lost a Canadian claim against them in the WTO.
I imagine our Canadian friends, especially their soft lumber industry, would be surprised to learn that the Bush admin. had any "free trade" credentials.
Especially after the tariffs remained in place after the US lost a Canadian claim against them in the WTO.
Nari said,
"I imagine our Canadian friends, especially their soft lumber industry, would be surprised to learn that the Bush admin. had any "free trade" credentials.
Especially after the tariffs remained in place after the US lost a Canadian claim against them in the WTO."
Quite true. But this isn't about "good" and "bad", it's about "bad" and "worse". The Buy America provisions of the stimulus package and the hardening of the US/Canada border under the Obama Administration are definitely "worse".
Nari said,
"I imagine our Canadian friends, especially their soft lumber industry, would be surprised to learn that the Bush admin. had any "free trade" credentials.
Especially after the tariffs remained in place after the US lost a Canadian claim against them in the WTO."
Quite true. But this isn't about "good" and "bad", it's about "bad" and "worse". The Buy America provisions of the stimulus package and the hardening of the US/Canada border under the Obama Administration are definitely "worse".
I'm basically alright with low tariffs among the NAFTA nations, but that's about it though, raise 'em up, bring on semi-autarchy, it's step 1 in an industrial policy that can rescue America.
I'm basically alright with low tariffs among the NAFTA nations, but that's about it though, raise 'em up, bring on semi-autarchy, it's step 1 in an industrial policy that can rescue America.
The Chinese Tire Tariffs were welcome for many reasons and the Republicans, outside of the editorial page of the WSJ, will avoid making to much out of this. President Obama's move was a shrewd nod to labor and a significant message to China and the investment community.
The week of the tariff announcement Goodyear announced a contract ratification vote supporting a concessionary contract. But it was better than the last one two years ago after a bruising strike which got nothing for the union.
Tire Manufacturing is labor intensive and dirty, hot, work. Heavy steel belts need to be inserted into hot molds and heavy hot tires need to be pulled out. Automation helps reduce the handling, but i ... view full comment
The Chinese Tire Tariffs were welcome for many reasons and the Republicans, outside of the editorial page of the WSJ, will avoid making to much out of this. President Obama's move was a shrewd nod to labor and a significant message to China and the investment community.
The week of the tariff announcement Goodyear announced a contract ratification vote supporting a concessionary contract. But it was better than the last one two years ago after a bruising strike which got nothing for the union.
Tire Manufacturing is labor intensive and dirty, hot, work. Heavy steel belts need to be inserted into hot molds and heavy hot tires need to be pulled out. Automation helps reduce the handling, but it is hard arduous work. Fortunately it is steady. People need tires and even in lean times they understand the importance of keeping good rubber on the road.
The tire business is now dominated by 3 international firms. Goodyear, Michelin and Bridgestone with secondary players like Continental, Pirelli and Cooper relagated to niche products and aftermarket. International firms do not have to make decisions on plant locations by nation. They move plants to low cost locations. Most US tire production has moved south and west to lower cost plant. If Mexico had an reasonable business climate there would not be a tire made in America.
There are many problem with the Chinese tires. First, when a Multinational sets up shop in China to make tires they are required to export for 10 years before being allowed to sell domestically in China. This export only investment provides advantages to these companies that America can not match.
Second, these Chinese tires are lower quality and potentially dangerous. In manufacturing and design many things can go wrong. While the Chinese are good at many things, what happens with the next Firestone?
Lastly is the ability of the US Market to absorb all these products. Everyone assumes the US market is elastic and capable of absorbing all this production. But there comes a time where predatory pricing starts and companies fold up. And while the Multinationals ship in from China abroad, the influx of immigrants into the states makes domestic employment more difficult.
Global trade has many benefits, but the economist have not seen anything like this. America is starting to see wages stagnate, and equilize with the foreign competitors. The dollar is weakening. Any Free Trade Economist will admit that they have no idea what will happen next.
I think the Republicans will remain on the sidelines for this one. A little sniping. But until the US economy starts to get clearer and jobs rebound, protectionism is the least of the problems.